Hong Kong Exchanges and Clearing Limited (HKEx) and Sydney Futures Exchange Limited (SFE) have entered into a strategic initiative to develop a range of new derivative trading and clearing services for the Asia Pacific exchange-traded and over-the-counter or OTC marketplaces.

The details of the first phase of the strategic initiative will be agreed upon by May 2001. It is expected to include a derivatives clearing link to facilitate transactions in both markets.

Robert Elstone, SFE Managing Director and CEO, said: "The international reputation, geographical location and product offering of both exchanges make SFE and HKEx natural business partners. This strategic initiative is the product of a significant cooperative effort over the past six months. Through the harmonisation of operational practices, risk management, regulation and technology, SFE and HKEx intend to lower costs for market users and to develop new cross-border trading and clearing opportunities."

Frederick Grede, Chief Operating Officer of HKEx, said: "Subsequent to the completion of phase one and after further market consultation, we will use the combined expertise and liquidity pools of HKEx and SFE to deliver additional services of real and immediate benefit to our respective customers. Such additional services could include cross-margining facilities, access to both exchanges trading platforms, facilitation of access through clearing cooperation, and the harmonisation of derivative trading networks and clearing technology."

HKEx offers clearing and settlement services for both the equity and derivatives markets of Hong Kong, and SFE recently merged with Austraclear, the central depository and debt securities settlement system in Australia. The SFEs Robert Elstone continued: "The strategic initiative between SFE and HKEx markets strengthens the relationship between the two exchanges and their respective clearing houses. This creates the opportunity to collectively develop further trading, central counterparty and delivery versus payment services for the equity and debt markets of the Asia Pacific region."

The HKEx-SFE strategic initiative is consistent with a meeting in December 2000 between Hong Kong Secretary for Financial Services Stephen Ip and Australian Financial Services and Regulation Minister Joe Hockey, which called for greater cooperation between the Australian and Hong Kong financial services industries.